Hi, can someone please check if I did this correctly. Thanks :wink:
How much larger will the value of an RRSP be at the end of 25 years if the contributor makes month-end contributions of $300 instead of year-end contributions of $3,600? In both cases the RRSP earns 6.8% compounded quarterly.
REQUIRED:
1. Month-end contributions.
2. Year-end contributions.
ANSWERS
1.
T : 25 YEARS I=6.8% QUARTERLY PMT 300 PER MONTH
I=6.8/4=0.017
I=(1+I) ^m/m2 -1 =(1+0.017)^4/12 -1=0.0056349554
FV=PMT [ (1+i)^n -1]
=300 [ (1+i)^25*12-1 ] = 234058.72
i
2. 25 years i=6.8/quarterly pmt 3600 per year
i=o.o17
i=(1+i)^m/m-1 =(1+0.017)^4/1-1 = 0.06797537355
FV=3600 [(1+i)^25] =226893.15
How much larger will the value of an RRSP be at the end of 25 years if the contributor makes month-end contributions of $300 instead of year-end contributions of $3,600? In both cases the RRSP earns 6.8% compounded quarterly.
REQUIRED:
1. Month-end contributions.
2. Year-end contributions.
ANSWERS
1.
T : 25 YEARS I=6.8% QUARTERLY PMT 300 PER MONTH
I=6.8/4=0.017
I=(1+I) ^m/m2 -1 =(1+0.017)^4/12 -1=0.0056349554
FV=PMT [ (1+i)^n -1]
=300 [ (1+i)^25*12-1 ] = 234058.72
i
2. 25 years i=6.8/quarterly pmt 3600 per year
i=o.o17
i=(1+i)^m/m-1 =(1+0.017)^4/1-1 = 0.06797537355
FV=3600 [(1+i)^25] =226893.15